Business Environment and Strategic Management

The assignment is about analyzing the business environment and strategic management of Qantas Airline using Porter's Five Forces Model. The five fundamental competitive forces of Porter's model are buyer's negotiating power, supplier's bargaining power, threat of new entrants, threat of substitute products, and rivalry among existing competitors. The analysis helps in understanding how Qantas can maintain its competitive position in the aviation industry.

Running Head: Business environment and strategic management
Business environment and strategic
management
Essay

Business environment and strategic management
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Introduction
The way of doing business and the scale of companies in different industry is
continuously changing, and at the same time; we can observe that the business environment is
also changing faster than even before. The business environment includes two main forces,
external and internal. The external forces can have great influence on business and uncertain
for the market. While internal forces are within the command of industry. In such case it is
essential to analyse these environmental factors thus the business organization compete with
other competitors. Porter’s model is considered as an important tool to analyse the business
environment that shows the five forces that affect the competitive environment of a business
organization, which affects profitability.
Porter’s five forces model
Porter’s competitive model focuses on 5 specific elements that help to understand,
whether or not a business can be profitable or sustainable, on the basis of other business
existed in the industry (Hubbard, Rice, & Galvin, 2015). A healthy and well organized
industry structure should be as much as important to strategist as their company’s own
position (Martin, 2017). The five fundamental competitive forces of porter’s model are as
follows: (1) buyer’s negotiating power (2) negotiating power of supplier (3) threats of
substitute (4) entry of new competitors (5) competition among the existing players. Porter’s
competitive model is so useful and often used business strategy technique which is more
reliable and realistic alternative to the widely used SWOT analysis (Huggings & Ijushi,
2011).

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Source: adopted from Porter’s Force model, 1979
Application of the model
To analyse the industrial environment with the help of porter’s model in Qantas
airlines which is one of the largest carrier service of Australia and second largest of the
world. Mergers and acquisition helps in increase the competition in aviation industry. The
competition in airways industry is continuously increasing specially through mergers and
acquisitions. In 2003, by following a two brand strategy to compete with competitors, Qantas
establish its low cost airline ‘Jetstar’. With ‘two brand strategy’ Qantas group can compete
with small players in the market and predict market opportunities and can offer the best
services to its customers and create the competitive advantage over its competitors. After this
step of Qantas group, there are number of new competitors arises in the aviation industry, and
they follow the strategy of Qantas and affecting the market share with low price offering
(Mouawad, 2010).
Therefore, it is tough to enter in aviation industry due to cut throat competition, and
high barrier, and it also requires a large capital investment. In the era of the low profit
margins and heavy competition, it is difficult to make adequate profit in the industry.
Therefore, it is so usual for the airways companies to show losses in their balance sheet. So, it
is difficult for a new entrant to enter in the market because of losses in the initial phase of the
operation. Therefore in the initial phase of this industry a new player must be able to handle
this pressure. Another barrier for the new players in the Australian aviation industry is limited
slots on airports for landing (CGMA, 2013).
There are number of alternatives available for long distance travelling such as boats,
trains, boats, cars, and cruise, these are normally economical than airways transportation.
However aviation industry has absolute advantage over others considering of time
consumption. Therefore, many peoples prefer the Arial transportation in a compare to other
means of transportation. Thus, the threat of substitute is comparatively low (Srisaeng, Wild,
& Baxter, 2014).
There are many big suppliers for large airlines but among them Boeing and Airbus are
two big suppliers for the large airlines like Qantas. Qantas expend huge money on the next
generation aircraft and fuel efficiency; such as Boeing 787 Dreamliner, and Airbus A380
(Qantas, 2017). Dependency on fuel prices for its profit margin, Qantas has to suffer with
high supplier’s bargaining power. The high rises in Price of fuel can easily affect the profit
margin of Qantas airways and can also affect the fuel efficiency. Due to the less number of
suppliers and continuous demand of fuel with fluctuation in the price of fuel, we can say that
the supplier’s bargaining power is quit high (Thompson & Gamble, 2013).
The consumer’s buying bargaining power with Qantas is little high because of their
price based preferences. There are number of airways that provide same service in
comparatively low prices that attract customers and offer them the best return of their money.
Due to the great availability of advanced technology tools such as Flight Centre and Sky
Scanner consumer’s ability to compare prices and flight services before making their final

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selection. So, the bargaining power of the buyers is very high and the switching cost for
consumer is very low.
Usefulness and Limitations
According to me, through the strategic planning and capabilities of the best use of the
resources, Qantas gain competitive advantage over its competitors. The company can face its
external environment challenges and win. Besides the bargaining power of provider is really
high in the market and which destabilizes companies in aviation industry to exercise control
over its provider. The airways companies are real competitors and as a result of it the margin
of profit is less. The new entry cost in airways industry is also too high. So, the number of
new competitors in international aviation industry is comparatively low in a compare with
other industry. Qantas can dominate in this market but for that Qantas can reduce the prices
according to the industry standard prices
Conclusion
In the end it can be concluded that the Qantas group has adopted the partnership
strategies and make alliance to make a dominating place in aviation industry. But there are
some threats that constantly affect Qantas airways, such as cut throat competition, customers
bargaining power, fuel cost, alternative transportation, and low cost airlines. With using two
brand strategies and applying their core competencies and its diversified quality services,
Qantas has remained strong in the aviation industry. To compete with both international and
domestic market competitors, the Qantas group need to apply better and effective strategy
planning to maintain the group’s position in aviation industry and prepare for the
unfavourable changes which always threatening to this industry.

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References
CGMA, (2013). Porters five forces of competitive position analysis. Retrieved from:
shttps://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html
Hubbard, G., Rice, J., & Galvin, P. (2015). Strategic management: thinking, analysis and
action (5th ed.). Melbourne, Australia: Pearson Australia.
Huggings, R. & Izushi, H. (2011). Competition, competitive advantage and cluster. (1st ed.),
New York Oxford: Oxford university press.
Martin, M. (2017). Porters five forces: analysing the competition. Retrieved from:
https://www.businessnewsdaily.com/5446-porters-five-forces.html
Mouawad, A. (2010). Pushing 40, southwest is still playing the rebel. New York Times.
Retrieved from: https://www.deseretnews.com/article/700099601/Southwest-Airlines-
Pushing-40-still-playing-the-rebel.html
Porters five force model, (2018). Image source. Retrieve from:
https://cpslearning.regis.edu/multimedia_exemplars/images/1_5_3_porters_forces_sm
.gif
Qantas Annual review, (2017). Position for sustainability and growth. Retrieved from:
http://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/
file/annual-reports/2017AnnualReview.pdf
Srisaeng, P., Baxter, S.G. & Wild, G. (2014). The evolution of low cost carriers in Australia.
Journal Aviation, 18(4).
Thompso, A. & Gamble, J. (2013). South west airlines in 2010: Culture value and operating
practices. Retrieved from: https://www.bartleby.com/essay/Southwest-Airlines-in-
2010-Culture-Values-and-PKPJDZD386TA